Drax boss warns against windfall tax

A windfall tax on energy companies would 'destabilise' the industry, the chief executive of power group Drax claimed yesterday.

Speaking out: Dorothy Thompson, chief executive

Dorothy Thompson said that a levy on profits, which the Treasury is rumoured to be considering ahead of next week's Budget, 'would be unwise and destabilising at a time when significant investment is required to close the emerging capacity gap'.

But her comments, made alongside full-year results, cut little ice with fuel campaigners and homeowners, who have seen household electricity bills jump by £137 in the past five years, to an average of £379 a year.

Critics will also seize upon the fact that cash-rich utilities have lavished hundreds of millions on shareholders in recent years as profits have soared. Drax has returned £657m to investors via dividends and buybacks since listing on the Stock Exchange in December 2005.

But it seems Thompson's views also represent those of the wider industry, and British Gas owner Centrica said huge investment was vital 'to keep the lights on for UK plc'. Consumer groups hit back by calling for further measures to end fuel poverty. Philip Cullum, chief executive of the National Consumer Council, is in favour of 'social tariffs' for the vulnerable, rather than a huge windfall tax.

Separately, an unusually warm winter and rising coal prices meant Drax to reported a 29% fall in pre-tax profits to £449m for the year to December. However, Thompson said that as older power stations are retired, the electricity market would tighten, which could create more opportunities for Drax.

The company will pay a final dividend of 9.9p a share and a special dividend of 7.8p. Drax also said that finance director Gordon Boyd would leave in the second half of this year 'to pursue other opportunities.' A spokesman said no pay-off had been agreed.